Tips for First-Time Home Buyers

1. Start saving for a down payment early

It’s common to put 20% down, but many lenders now permit much less, and first-time homebuyer programs allow as little as 3% down. But putting down less than 20% may mean higher costs and paying for mortgage insurance, and even a small down payment can still be hefty. For example, a 5% down payment on a $200,000 home is $10,000.


2. Explore your down payment and mortgage options

There are lots of mortgage options out there, each with its own combination of pros and cons. Making a higher down payment will mean having a lower monthly mortgage payment. If you want the smallest mortgage payment possible, opt for a 30-year fixed mortgage. But if you can afford larger monthly payments, you can get a lower interest rate with a 20-year or 15-year fixed loan


3. Research state and local assistance programs

In addition to federal programs, many states offer assistance programs for first-time homebuyers with perks such as down payment assistance, closing cost assistance, tax credits and discounted interest rates. Your county or municipality may also have first-time homebuyer programs.


4. Determine how much home you can afford

Before you start looking for your dream home, you need to know what’s actually within your price range. Use this home affordability calculator to determine how much you can safely afford to spend.


5. Check your credit and pause any new activity

When applying for a mortgage loan, your credit will be one of the key factors in whether you’re approved, and it will help determine your interest rate and possibly the loan terms.

So check your credit before you begin the homebuying process. Dispute any errors that could be dragging down your credit score and look for opportunities to improve your credit, such as making a dent in any outstanding debts.

6. Compare mortgage rates

Many home buyers get a rate quote from only one lender, but this often leaves money on the table. Comparing mortgage rates from at least three lenders can save you more than $3,500 over the first five years of your loan, according to the Consumer Financial Protection Bureau. Get at least three quotes and compare both rates and fees.


7. Get a preapproval letter

You can get pre-qualified for a mortgage, which simply gives you an estimate of how much a lender may be willing to lend based on your income and debts. But as you get closer to buying a home, it’s smart to get a preapproval, where the lender thoroughly examines your finances and confirms in writing how much it's willing to lend you, and under what terms. Having a preapproval letter in hand makes you look much more serious to a seller and can give you an upper hand over buyers who haven’t taken this step.


8. Hire the right buyer's agent

You’ll be working closely with your real estate agent, so it’s essential that you find someone you get along with well. The right buyer's agent should be highly skilled, motivated and knowledgeable about the area.


9. Pick the right type of house and neighborhood

  • Research nearby schools, even if you don’t have kids since they affect home value.
  • Look at local safety and crime statistics.
  • Map the nearest hospital, pharmacy, grocery store and other amenities you’ll use.
  • Drive through the neighborhood on various days and at different times to check out traffic, noise and activity levels.

10. Stick to your budget

Look at properties that cost less than the amount you were approved for. Although you can technically afford your preapproval amount, it’s the ceiling — and it doesn’t account for other monthly expenses or problems like a broken dishwasher that arise during homeownership, especially right after you buy. Shopping with a firm budget in mind will also help when it comes time to make an offer.


11. Make the most of open houses

When you're touring homes during open houses, pay close attention to the home’s overall condition, and be aware of any smells, stains or items in disrepair. Ask a lot of questions about the home, such as when it was built, when items were last replaced and how old key systems like the air conditioning and the heating are.

First-time home buyer mistakes to avoid


1. Not budgeting for closing costs

In addition to saving for a down payment, you’ll need to budget for the money required to close your mortgage, which can be significant. Closing costs generally run between 2% and 5% of your loan amount.


2. Not saving enough for after move-in expenses

Once you've saved for your down payment and budgeted for closing costs, you should also set aside a buffer to pay for what will go inside the house. This includes furnishings, appliances, rugs, updated fixtures, new paint and any improvements you may want to make after moving in.


3. Buying a home for today instead of tomorrow

It's easy to look at properties that meet your current needs. But if you plan to start or expand your family, it may be preferable to buy a larger home now that you can grow into. Consider your future needs and wants and whether the home you’re considering will suit them.


4. Passing up the chance to negotiate

A lot can be up for negotiation in the homebuying process, which can result in major savings. Are there any major repairs you can get the seller to cover, either by fully handling them or by giving you a credit adjustment at closing? Is the seller willing to pay for any of the closing costs? If you’re in a buyer's market, you may find the seller will bargain with you to get the house off the market.


5. Not knowing the limits of a home inspection

  • Not all inspections test for things like radon, mold or pests, so be sure you know what's included.
  • Make sure the inspector can access every part of the home, such as the roof and any crawl spaces.
  • Attend the inspection and pay close attention.
  • Don’t be afraid to ask your inspector to take a look — or a closer look — at something. And ask questions. No inspector will answer the question, “Should I buy this house?” so you’ll have to make this decision after reviewing the reports and seeing what the seller is willing to fix.

6. Not buying adequate homeowners insurance

Before you close on your new house, your lender will require you to buy homeowners' insurance. Shop around and compare insurance rates to find the best price. Look closely at what’s covered in the policies; going with a less expensive policy usually means fewer protections and more out-of-pocket expenses if you file a claim. Also, flood damage isn’t covered by homeowners' insurance, so if your new home is in a flood-prone area, you may need to buy separate flood insurance.


7. Consult with a HUD Certified Housing Counselor

Brighton Center have HUD certified Housing Counselors that can assist you with reaching your goal of homeownership. IF THIS IS YOUR GOAL please contact Brighton Center at (859) 491-8303 Ext. 2314.